Wells Fargo Unveils 1Q Beat But Sales Fall Short

Led by ramped up cost-cutting initiatives and improvement in its consumer banking and credit businesses, Wells Fargo (WFC) revealed a stronger-than-expected 23% improvement in first-quarter profit.

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However, sales slumped from the year-earlier period and disappointed expectations, pushing shares of Wells Fargo down 2%.

Revenue for the three-month period ended March 31 was $21.3 billion, down slightly from $21.6 billion a year ago, and short of the Street's view of $21.59 billion. The bank attributed the decline to the absence of the higher-than-average equity gains Wells Fargo recognized last quarter as well as the expected seasonal changes in the mortgage business.

Despite headwinds, the San Francisco-based bank reported record quarterly profit of $5.2 billion, or 92 cents a share, compared with a year-earlier profit of $5.09 billion, or 91 cents, topping average analyst estimates of 88 cents in a Thomson Reuters poll.

Meanwhile, net charge-offs fell to $1.4 billion from $2.4 billion last year in a sign of an improving credit market, while mortgage originations jumped 37% to $52.7 billion as the housing market continued to rebound.

“Loans and deposits demonstrated continued growth in a challenging economic environment,” Wells Fargo CEO John Stumpf said in a statement. “In addition, expenses continued to decline as we improved efficiency across the franchise.”

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Part of that streamlining involved reducing headcount over the last year. Wells Fargo ended the first quarter with 255,898 workers, a decrease of 5,271 compared with the prior year.